Did China Petrochemical Development's (TPE:1314) Share Price Deserve to Gain 32%?

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the China Petrochemical Development Corporation (TPE:1314) share price is up 32% in the last five years, that's less than the market return. The last year hasn't been great either, with the stock up just 1.0%.

View our latest analysis for China Petrochemical Development

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years of share price growth, China Petrochemical Development moved from a loss to profitability. That's generally thought to be a genuine positive, so we would expect to see an increasing share price.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on China Petrochemical Development's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for China Petrochemical Development the TSR over the last 5 years was 43%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

China Petrochemical Development shareholders are up 4.6% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 7% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for China Petrochemical Development (1 shouldn't be ignored!) that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW exchanges.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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